Working Paper: NBER ID: w28339
Authors: Assaf Razin
Abstract: Post WWII globalization forces are facing headwinds in the form of global crises-the “The Great Recession” and the “The Pandemic Recession”. Israel’s trade and financial globalization, however, is steadily rising. The pandemic-induced slump in economic activity is deep, as consumer spending, investment spending, and export demand tumble. Central banks, tied down by the zero interest rate, resort to semi-fiscal expansionary policies. Indeed, the stabilization burden falls on fiscal policy. The paper provides an overview of the new globalization trends in the world and in Israel, with emphasis on the role of global crises, the Global Financial Crisis, and the Pandemic Crisis in changing globalization long-term trends. When the coronavirus hit, supply chains and production have been disrupted. However, the impact of the pandemic shock is not on the supply side only. On the demand side, the desire to invest has plunged, while people across the rich world are now saving much of their income. Would this short-term changes can reinforce the re-trending of the globalization, which is observed since the Global Financial Crisis? The paper focuses on globalization and provides comparative overview of experiences of the advanced economies and Israel.
Keywords: globalization; global crises; Israel; trade; financial globalization
JEL Codes: F1; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pandemic-induced economic slump (F44) | declines in consumer spending (D12) |
| pandemic-induced economic slump (F44) | declines in investment spending (E20) |
| pandemic-induced economic slump (F44) | declines in export demand (F14) |
| declines in consumer spending, investment spending, and export demand (E20) | overall economic activity and recovery trajectories (E66) |
| zero interest rates (E43) | semi-fiscal expansionary policies (E62) |
| pandemic (F44) | shift in consumer behavior (D16) |
| pandemic (F44) | increased savings rates (D14) |
| global financial crisis and pandemic crisis (F65) | retrenching globalization (F69) |
| educational disruptions (I24) | long-term effects on social mobility and productivity (J62) |
| pandemic (F44) | economic inequality (D31) |